"Don't Close Your Oldest Card" a Common Credit Myth?

[rbentley]

One of the most common bits of credit advice is to never close your oldest card.  The reason usually stated is because it will hurt your AAoA, which makes up 15% of your score.  But inherent in that advice is the assumption that a closed account does not contribute to your AAoA.  Most on here know that it does continue to factor in, although not grow.  A positive account will remain for 10 years, a negative one, only seven.  In that time your other open accounts should have aged to more than make up the difference.

So if you have a significantly oldest account, especially one with an AF or bucketed limit, is there any good reason not to close it?  Isn't the "Don't close your oldest account", just a myth?

[Kree]

I went from a 16 AoOA to a 9 year AoOA because my oldest account's institution closed, and 10 years later it fell off of my report.

Now if I had know a decade ago what I know know, I would never have gone 7 years without opening more revolving lines of credit.

I also do not know what the effect on my score was, as I did not monitor it at that time. But I do know that my negative reason codes usually include my AoOA or my AAoA, so if I still had that account I would have a better score.

 Also, while FICO is still king, not all scoring systems count closed accounts. So unless there is an unreasonable fee attached, keeping the account open is seems like a smart hedge.

[Anonymous]

Note that Kree is wisely talking about another scoring factor: Age of Oldest Account (AoOA).  That's counted separately from AAoA (Average Age of Accounts). 

A closed account often stays on for ten years, but doesn't always.  SouthJ and Thomas Thumb and others have had closed accounts deleted well before that.  And as Kree observes, even if it does stay on for ten years, when it does fall off it could cause a precipitous drop to a persons Age of Oldest.  E.g. Bob has one credit card for 25 years.  He opens a few more and decides the old one is not nearly as cool -- no splashy rewards, etc.  So he closes it.  Ten years later his AoOA drops from 35 to 11.

Here are some reasons to soften the "Never close your oldest card" rule:

*  It has an annual fee

*  You have at least one more open card that is close to its age (e.g. oldest card is 4 years, and second oldest is 2).

If either of those two things are true, then closing it may be no problem at all.  Other reasons to close a no-annual fee card:

* I do not like it

* It is a store card

* It has a tiny credit limit

* It is one of my younger cards

If most of those things are true, then closing it may make sense.

[SouthJamaica]

I would never say "Don't close your oldest card"

I would say "Think twice about closing your oldest card"

[rbentley]

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@Anonymous wrote:

Note that Kree is wisely talking about another scoring factor: Age of Oldest Account (AoOA).  That's counted separately from AAoA (Average Age of Accounts). 

A closed account often stays on for ten years, but doesn't always.  SouthJ and Thomas Thumb and others have had closed accounts deleted well before that.  And as Kree observes, even if it does stay on for ten years, when it does fall off it could cause a precipitous drop to a persons Age of Oldest.  E.g. Bob has one credit card for 25 years.  He opens a few more and decides the old one is not nearly as cool -- no splashy rewards, etc.  So he closes it.  Ten years later his AoOA drops from 35 to 11.

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Isn't the maximum scoring benefit for age of account happen at 9+ years, so that the dropping from 35 to 11 years would have no scoring effect?

[Kree]

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@rbentley wrote:

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@Anonymous wrote:

Note that Kree is wisely talking about another scoring factor: Age of Oldest Account (AoOA).  That's counted separately from AAoA (Average Age of Accounts). 

A closed account often stays on for ten years, but doesn't always.  SouthJ and Thomas Thumb and others have had closed accounts deleted well before that.  And as Kree observes, even if it does stay on for ten years, when it does fall off it could cause a precipitous drop to a persons Age of Oldest.  E.g. Bob has one credit card for 25 years.  He opens a few more and decides the old one is not nearly as cool -- no splashy rewards, etc.  So he closes it.  Ten years later his AoOA drops from 35 to 11.

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Isn't the maximum scoring benefit for age of account happen at 9+ years, so that the dropping from 35 to 11 years would have no scoring effect?

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I think AAoA is 9 years, and AoOA is 25 years. But that could just be all the "analysis" that comes with credit reports and not be actual max values.

[Anonymous]

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@rbentley wrote:

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@Anonymous wrote:

Note that Kree is wisely talking about another scoring factor: Age of Oldest Account (AoOA).  That's counted separately from AAoA (Average Age of Accounts). 

A closed account often stays on for ten years, but doesn't always.  SouthJ and Thomas Thumb and others have had closed accounts deleted well before that.  And as Kree observes, even if it does stay on for ten years, when it does fall off it could cause a precipitous drop to a persons Age of Oldest.  E.g. Bob has one credit card for 25 years.  He opens a few more and decides the old one is not nearly as cool -- no splashy rewards, etc.  So he closes it.  Ten years later his AoOA drops from 35 to 11.

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Isn't the maximum scoring benefit for age of account happen at 9+ years, so that the dropping from 35 to 11 years would have no scoring effect?

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No.  Take a look at what I wrote earlier where I distinguished AAoA from AoOA. 

With AAoA, there has been a conjecture made by some forum contributors that people get no scoring benefit from having an AAoA of (say) 17 compared to an AAoA of 9.  Once the person has hit 9, there's no more advantage.

That is a conjecture.  It is based on the known fact that a person can have a score of 850 with that lower AAoA.  That fact in itself does not prove that it doesn't help you to have the much greater AAoA.  Perhaps a person with the AAoA of 17 can get an 850 more easily -- doesn't have to have as many other things perfect in his profile.

With AoOA, however, there is no question that an AoOA of 35 would help you more than an AoOA of 11. 

[Anonymous]

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@rbentleyThe reason usually stated is because it will hurt your AAoA, which makes up 15% of your score.  But inherent in that advice is the assumption that a closed account does not contribute to your AAoA.  Most on here know that it does continue to factor in, although not grow.  A positive account will remain for 10 years, a negative one, only seven.  In that time your other open accounts should have aged to more than make up the difference.

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I think it's important to point out that there are several points stated above that aren't accurate, just so that those reading don't become misinformed here.  AAoA does not make up 15% of your score.  "Length of Credit History" makes up 15% of your score, with AAoA being one portion of that.  In addition to AAoA you have to consider AoYA and AoOA as well.  A closed account will continue to contribute and grow until the point when it falls off.  If an account is 8 years old and is closed, 5 years later if it's still present on the CR it will be averaged in as a 13 year old account.  So, even though it's closed, it's still "growing" in age until it vanishes from the CR.  A positive account and a negative account don't remain for different amounts of time based on the account being clean or dirty.  An clean account closed 9 years ago and a dirty account closed 9 years ago if both are visible on a CR will be impacting that profile the same way in terms of age of accounts factors.  I believe that the OP is confusing the 7 year time frame with the point that negative items typically fall off of an account.  A negative item may fall off, but the account will still be there.

[Anonymous]

Keep in mind you can often PC your oldest account while keeping you credit history. My oldest revolver started out as a BOA Student VISA but is now a 1/2/3 with 8 years on history.

[Anonymous]

I reflected once again, while reading this thread, that it's turned out to be a good thing that I took all those forbearances on my student loan (originally taken out in the mid-1980's and transferred to Sallie Mae, now NAVIENT, in 1994) way back when; it's a long, tangled story. If not for that, my AOOA and my AAoA would both be pretty slender. As it is, the student loan is over 24 years old, my oldest account by far, and my AAoA is 6 years or so even though all my other active accounts have been opened within the past two years.